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Bank of America Merrill Lynch Neutral on Medicis Pharmaceutical


Bank of America Merrill Lynch is out with a research report on Medicis Pharmaceutical Corporation (NYSE: MRX) and it has a Neutral rating and a $40 price target on shares.

In a note to clients, Bank of America Merrill Lynch writes, "MRX shares are down >10% since the 3Q call (11/8), which we believe is due in part to concerns about Solodyn sales (50% of total revs) growth, given (1) the company's aggressive contracting strategy for newer strengths and (2) impending launch of generics of the legacy strengths on 11/26. In our view, the contracting issues should be largely reflected in estimates, and history would suggest that the launch of generics of certain strengths should not materially affect MRX sales. If Solodyn Rx (prescription) trends hold up in the 1-2-month period following the 11/26 generic launches, MRX shares should rebound. The large and growing cash position ($820mn, or $12/share) also creates opportunities for MRX, such as the recently announced acquisition of Graceway; our initial view is that the deal appears positive, in that it is accretive, adds cash flow, and expands the pipeline. We are sticking with our Neutral rating, primarily because we don't see enough upside to justify a Buy, given product concentration and limited pipeline visibility."

Shares of MRX are down 2 cents to $32.65 in early Friday trade.


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